The Credit Report explained: is it as scary as it sounds?

Before accepting you for a Car Finance Agreement, Lenders need to assess the level of risk. This is usually carried out by looking at your Credit Report.

My Car Credit takes a look at the type of information that is taken into consideration within the assessment and offers some advice on how to build and protect your credit report.

What and who are Credit Reference Agencies?

Before giving you credit, Finance Lenders such as banks and loan companies want to be confident that you can repay the money they lend. To help them do this, they may look at the information held by companies called credit reference agencies.

Credit Reference Agencies provide Finance lenders with a range of information about potential borrowers, which lenders use to make decisions about whether they will offer you credit or not.

Most of the information held by the Credit Reference Agencies relate to how you have maintained your credit and service/utility accounts and if there are any late or missed payments. It also includes details of your previous addresses and information from public sources such as the electoral roll, public records including county court judgments, bankruptcy and insolvency data.

The information held by the Credit Reference Agencies is also used to verify the identity, age and residency of individuals, to identify and track fraud, to combat money laundering and to help recover payment of any debts. Government bodies may also access this credit data to check that individuals are entitled to certain benefits and to recover unpaid taxes and similar debts.

• History of paying things back – have you missed payments in the past?

• Your outstanding balance – how much you have borrowed in total, by type (how much overdraft, how much on credit cards, how much on loans)?

• How much spare credit do you have – for example, you have a £1,000 credit card limit, but are only £50 into it?

• How long have you had these accounts – the longer, the better your credit score in many cases.

• How many times you have applied for credit – if you have just applied for 20 new credit cards, that will show up to anyone looking at the report?

• Are you on the electoral roll?

• Have you ever had any CCJs, IVAs or been declared bankrupt in the past 6 years?

• Do you have any debts at a previous address(es)?

• Have you ever been a victim of fraud?

• How many addresses are you linked to – do you have credit accounts where the payment address is not current, or different from your main address?

• Past names – maiden names, name changes.

• Any financial associates? – these are people you are linked to through joint accounts.

Could my age affect my Credit Report?

Many people assume that the strongest credit report would be one showing only their personal information that holds no record of any borrowing or missed payments – this is what most young people’s credit reports look like.

However, lenders can in fact find these types of reports difficult as they don’t provide them with any historical information about how somebody manages their finances, this can make it harder to assess the risk. Banks and building societies tend to prefer a credit report that shows well-managed borrowing.

How important is it to maintain a good Credit Report?

It is very important. There will be times when you may need to use borrowing products such as car loans and mortgages. Here are the five main tips that My Car Credit would advise for maintaining a good credit history:

My Car Credit is a trading style of Evolution Funding Limited. Evolution Funding are authorised and regulated by the Financial Conduct Authority for credit brokerage. Our FCA number is 669005. Finance subject to status. Terms and Conditions apply. A guarantee may be required. Over 18’s only. PLEASE ENSURE YOU CAN AFFORD THE REPAYMENTS FOR THE DURATION OF A LOAN BEFORE ENTERING INTO A CREDIT AGREEMENT. We work with a number of carefully selected credit providers who may be able to offer you finance for your purchase. We are only able to offer finance products from these providers and they may provide an incentive to us to do so. Prices, offers and information correct at time of publishing. Evolution Funding Ltd is a credit broker and not a lender.